Snap-on at Bank of America Conference: Strategic Growth and Resilience

On Tuesday, 13 May 2025, Snap-on Inc. (NYSE:SNA) presented at the Bank of America Industrials, Transportation & Airlines Key Leaders Conference 2025. During the conference, Snap-on highlighted its strategic advantages, resilience to tariffs, and plans for future growth. While the company faces some economic uncertainties, its robust business model and strong market position paint a positive outlook.

Key Takeaways

• Snap-on focuses on developing tools that make jobs easier for technicians, emphasizing high market share and brand loyalty.
• The company benefits from manufacturing in the regions where it sells, reducing tariff impacts.
• Future growth is anticipated from the increasing complexity of vehicles and critical industries.
• Snap-on has consistently increased dividends for 15 years and prioritizes strategic capital allocation.
• The company has grown sales by 4% annually over 19 years, with profitability improving by 85 basis points each year.

Company Overview and Competitive Positioning

Snap-on, established in 1920, manufactures and sells tools, equipment, and software primarily to vehicle repair technicians and critical industries. Operating through a vertically integrated model, it has 36 factories worldwide and employs 13,000 people. The company’s divisions include:

• Tools Group: 40% of business, 25% margin, selling to mechanics via 3,500 franchise vans.
• Repair Systems & Information Group (RSNI): 28% of business, 25.7% margin, selling equipment and software.
• Commercial & Industrial Group (C&I): 28% of business, targeting industries outside automotive repair.

Snap-on’s competitive edge is bolstered by a 50-60% market share among technicians, strong brand loyalty, and a vertically integrated manufacturing process.

Tariffs and Economic Sentiment

Snap-on’s strategy of manufacturing in the regions where it sells, with 80% of van sales being US-made, provides an advantage against tariffs. Despite global uncertainties, such as geopolitical tensions and inflation, Snap-on adapts by focusing on products with shorter payback periods to meet changing customer needs.

C&I and Future Growth Opportunities

The C&I division experienced a 2.9% decline due to changes in defense sales, but other critical industries remain strong. Looking forward, Snap-on is poised to benefit from the demand for new tools and diagnostics driven by electric vehicles and advanced driver-assistance systems.

Capital Allocation and Financial Performance

Snap-on prioritizes investing in the business, strategic acquisitions, and returning value to shareholders through dividends and share buybacks. The company has grown earnings in the high teens outside the pandemic, with sales increasing by 4% annually over 19 years. Last year’s operating income margin was 22.7%, and gross margin was 50.7%.

Conclusion

For a comprehensive understanding, readers are encouraged to refer to the full transcript of the conference call.

Full transcript - Bank of America Industrials, Transportation & Airlines Key Leaders Conference 2025:

Sherif Elsabahi, Analyst, BofA: Thanks for joining us. I’m Sherif Elsabahi with BofA on the machinery engineering and construction team within Equity Research. Really glad to have Nick with us here from from Snap on. Really fortunate, and thank you for being here. Sure.

Just to start us off for those in the audience who may be less familiar with Snap on, could you provide an overview of the business model, your position in the market, and a high level operating backdrop? Sure.

Nick, Snap-on: Look. Snap as a company has been around a hundred and five years. Started in 1920 and basically started in the vehicle repair market. And the idea was there was very few cars that rode about 7,000,000 cars on the road at that time. The people didn’t know what mechanics were gonna do or what, and we’re in the mechanic, the repair business and didn’t know what tools mechanic would have.

So this engineer from Milwaukee, Wisconsin gets the idea. I can consolidate the tools and he puts it together. So he he gets this idea, take five handles of different configurations like a t, a crank, an ellipse and put them together with 10 handles, sockets of different dimensions and fashion them so they snapped on interchangeably. He said these five tools did the work of 50 and they did. They revolutionized tool sets all over the the the country.

And the idea of observing the work as he did in the garage and figuring out how to make it easier is what drives us today. Secondly, he make the tool he made the tools a great quality. You can pick them up here in our museum and it’d say if you put your back yourself back in the 1920, he would say these are made of great steel. But the third thing he did was was most lasting and most unusual is he said, okay, you know, we’re going to bypass the usual distributors that sell tools and we’re going to go right into the garage and talk to the mechanic and lay the tools out on green felt as if they were as precious as surgeons knives, implying that the mechanic used these tools. He would declare to the world he was doing something special, perhaps as special as a surgeon.

And the idea that the Snap on brand, the display of the Snap on brand or the use of the Snap on tools was the outward sign of pride and dignity that working men and women take in their profession is with us today, and it marks everything we do, which is about observing the work, figuring out how to make it easier and imparting and almost defining the mechanic or any worker that they are a professional by using such a special tool. Now it’s evolved over the years and, you know, we’ve become what we’ve become with 36 factories around the world and $5,000,000,000 worth of sales and the market cap wherever it is today. And and 13,000 employees, but 85,000 SKUs. And we’re in three divisions. Sort of like descendants of those first tools.

The first is the tools group. And the tools group sells to those same mechanics. They sell to the actual guys who make the repairs. The guys who twirl the wrenches and punch the buttons and touch the screens. And they sell, we sell through about 3,500 franchise vans in The United States.

And these franchise vans call on a route which calls on the same technicians every week. So what it means is every week we call on a million technicians. So we’re very vertically integrated. We make, we get, oh geez, we make the tools, we make the tools from raw steel in the back of the factory. We roll it down a line with a bunch of special processes and we put it in the hands of the end user.

That business is 40% of our business. And it makes about 25% margin in the quarter was down because of the uncertainty, but it’s a strong business. And I would say it’s a business model that fell from Saturn. We have about a 55% share, you know, 50 to 60% share. Then a cousin of that business, which started later, selling to a customer, which is about the same stands, you know, continue or contiguous with the with the mechanic itself.

That is the owner of the shop or the manager of the shop. They don’t buy in under a weekly cadence. They buy under like a semi capital expenditure basis, and we sell them things that are in that you see in shops. We sell lifts that you see in shops or or aligners or tire changers or balancers or software, which run the shop or manage their electronic parts catalog. That’s about 28% of our business.

It was up 3.7% in the quarter and it made 25.7 OI margin up 140 basis points. And then the third business, is about 28% of our business sells to people outside of automotive repair. We call it critical. We call it commercial and industrial. That business sells to other industries, but still critical.

Industries where the penalty for failure is high and the need for repeatability and reliability justifies a snap on level product. And there are things like the military, aviation, oil and gas, education, mining, anything you might imagine, natural resources that you might imagine, boy, if you screw up, bad things are going to happen. That’s where we sell. And it’s all taken together. It’s put together with the commonality of criticality.

That is the penalty for failure is high. And it’s driven by our principle value creating mechanism, which just like in the beginning, we go right into the place of work, observe the work, figure out how to make it easier with either a wrench or a piece of software and therefore make the job easier and more profitable for our customers. We also have a credit company which supports the sales primarily to the technicians And that’s about a couple billion dollar portfolio. That’s our business. Understood.

Sherif Elsabahi, Analyst, BofA: And, you know, as we look at the tools market, there’s a number of public players out there that sell tools. How do you look at the how do you fit into the competitive landscape and maybe how does Snap on differentiates itself versus some of these other Are kidding? Markets?

Nick, Snap-on: Yeah. Okay. All right. We, everything I told you is different mostly than what the other people do. Snap on is of course a premium tool.

And yes, we have people who sell through, you know, those three divisions all have competitors, but let’s take the tools group, which is what people think of. There’s a couple of, there’s, there are a few other mobile tool stores, but generally if you put together the idea of the being in the workplace, observing the work, creating a tool which specifically will help that work like taking out the spark plugs of a, of a F three fifty truck because you can’t reach the back ones or matching the bumpers of a Silverado so you can get behind it without taking it off or providing a software patch for other products. You know, those are diagnosing what a product is based on a database as opposed to a time consuming process. We have an advantage in product. We have an advantage in brands.

You know, I talked about the Greenfield. Well, people wear our jackets. I get out of van. The guy says, you know, he sold 80 jackets in two weeks to his 250 customers. You go to a county fair, you see Snap on hats and jackets.

I have people send me pictures of their weddings in front of Snap on boxes and on Snap on Vans. I have people send me pictures of the newborns with Snap on wrenches in their hands because they think if it touches the baby first, it will influence their life for better or worse. And I have people who ask me for small Snap on boxes so they can bury the ashes of their loved ones in them because Snap on tools was such a big part of their life. Nobody else has that kind of brand activity and it basically defines the person as a professional. And so I think we have that position and generally we have pretty good shares.

Like I said, we have 50 to 60%, way over 50% share in the, with the technicians, you know, a quarter of the repair shop owners and managers and, and varying shares depending on what the critical industries are. So I think we have a pretty good position.

Sherif Elsabahi, Analyst, BofA: Understood. And turning to to tariffs for a moment just because they’ve been so topical. I understand that for Snap on, maybe it’s not as significant an impact since you produce mostly in a region for your tools. But is there any impact there? And then secondly, does it impact the competitive landscape at all or some of these other producers for some of the lower end tools?

Nick, Snap-on: Well, first of all, you remember we talked about this is that, yeah, everybody wants to know what’s the impact on your competitive activity. It’s been like five weeks since the tariffs started. Everybody has inventory. There’s not gonna be any impact right away. If you ask about impact, you gotta be crazy.

But but the but the thing is is that in truth, we have we are advantaged in tariffs. We’re not immune to tariffs. We are resistant to tariffs, but we are advantaged by strategy and by structure. Because I said, our our principal value creating mechanism is to go into the workplace, not ask the technician what’s wrong, not survey people from a distance. We go into the actual workplace with people who are experts in the work and they observe it and say, this guy is having trouble with this.

We’ll try to fix that. Now we don’t make things possible. We make things easier. He’s working on it now. It’s it’s taking a lot of time.

So we do that. Now, what does that mean? You got to be in the workplace. So what it means is, is that we tend to make in the markets where we sell. So we’re close to that process.

So we make in Asia for Asia, we make in, you know, in Europe, Europe and we make in America for America, Eighty Percent. The vans I talked about, the 3,500 vans, I talked about 80% of what we sell off those van is made in America. So by strategy, we have an advantage. I don’t think anybody else quite does that way. Secondly, we have an advantage by structure and the structure is this.

We have 36 factories around the world, but 15 of them in The United States. And we expanded the biggest ones in the last two years. So we have the capacity in place and we make virtually not, not that we make, we bring stuff here. You know, I said 20% is from outside The United States. We bring stuff here from other factories like from Europe or Asia that we sell, but we we make a version of virtually all our major product lines here.

So we have the know how. And then one of the biggest barriers people will tell you about trying to manufacture United States is getting people. We don’t have any trouble getting people because we never laid off anybody in the pandemic. And so our people stay with us and we have a reputation in those places. So fundamentally we have that structural advantage.

People will say it’s three to five years. You’ve heard people say it’s gonna take three to five years for us to move this manufacturing back. So ain’t gonna take us that long if we have to produce everything because we have the know how we have the structure and we have the people. And if we have to source anything outside, let’s say one of the big problems I think today is if you look at, okay, you can talk about, okay, they move, they reduced the, what the reciprocal tariffs 10%, but there are other tariffs in the section three zero one tariffs are seven and a half percent or 25%. You lay on top of that, the EIP tariffs, and you’ve got a tariffs just today in China, Thirty Seven and a half percent or 55 And so those are a problem today.

And okay, maybe if the 10% goes to 30%, those numbers go to 75%. So you’re going to have to make adjustments as they make as they change the tariffs, and we’re going to do that. Plus there’ll be adjustments and things like when they when they launched the tariffs on April 2, they talked about Vietnam at 46%, Taiwan at 32%, Thailand at 28%, I think Malaysia was 24%. So at 38 rather, Thailand. And so then they said, never mind, it’ll be 10% for ninety days.

Then they’re going to go back and say, what are they going to be in the future? No one knows. So no one can do any of that. But what we can do is we have 25 factories outside The United States, which means 25 sourcing centers in different places. So we can plumb the depths of a lot of different sourcing areas if we need to provide other components.

So we think we’re in pretty good shape. We don’t think, we think virtually not many of our competitors or other manufacturers are in this kind of position. So I think we’re advantaged by this, whatever emerges from this tariffs and it is a fog, it’s a fog of tariffs. Nobody can predict what’s going to happen, I think. Don’t think the White House can predict what’s going to happen really.

And so we have to be flexible and we think in a flexible environment, in an requirement area, in an environment that requires flexibility, we are advantaged.

Sherif Elsabahi, Analyst, BofA: Understood. And and also along with tariffs, there’s been this sort of secondary impact that’s been a bit more prolonged about a year and a half now. Sentiment has been quite weak among mechanics and consumers. And alongside that, there’s been the pivot away from from larger item purchases. You’ve responded to that by pivoting towards quicker payback items, which is where the customers are are sort of at in in terms of what they’re looking for.

Maybe how has your response changed over the last few quarters in terms of new product introductions? And just among mechanics, maybe, how has their outlook changed at all in the last few quarters just given that they’ve been sort of deferring these purchases?

Nick, Snap-on: A bit of explanation. Okay. There’s always been a difference between the grassroots and the financial economy. When you call on a million technician, this presses heavily on your chest, but it got bigger during the pandemic. And the reason is during the pandemic, the people of work were at their posts.

They weren’t sheltering in place. They kept working. We worked every day because our factories worked. You know, I couldn’t face the factory workers if they didn’t work. And, and so they kind of, their experience got wider.

So coming out of the pandemic, they were euphoric when Wall Street was talking about, hey, you know, Jay Powell is going to increase interest rates and recession is coming and recession is coming. Were very positive during that period. Then as the as bad news started to pile up for breakfast, like the Ukraine war, then the Middle East war, then the tit for tat for China, then the Houthi war, then the idea that there was inflation and the prices didn’t come down. Beef is still 44% above pre pandemic levels and gas is not gas, but milk is still 23% above and eggs are God knows how much above. And so people worry about this kind of thing.

And so they started to get, I would say uncertain, even though they had cash. People kept pounding their cars through the garages. They were cash rich, but confidence poor. We have seen this phenomena before in the great financial recession, which I was around for and the pandemic turns out that the people of work are more influenced by their emotions than the data, by what they see. And that’s what we saw.

So we saw that last year and what that meant for us is we sell a couple of kinds of products. One, big toolboxes are $10,000 and other things like diagnostic units and we finance it through our credit company over three to four to five years. And then other types of product like might be hand tools, power tools or some of the smaller diagnostics. We might finance those, the franchisee will finance those over fifteen weeks. So what we found is the, our customers, our technicians started to pull away and be reluctant to tie themselves to longer payback items.

They didn’t want to tie themselves to three to four to five year cash flow requirements. And so they pivoted toward the fifteen weeks. And so we started to pivot. We started to pivot in terms of our product development, pull product development off of big, there’s a good concept when you see something like this, don’t pour water up a rope. And so the idea is, is you don’t want to keep pounding away at something somebody doesn’t want.

And so we did, we said, okay, we’ll start pulling away and we’ll push more into hand tools and power tools away from tool storage. And so we did that. And so we worked that. And in fact, that pivot was working as we started to close the gap year over year culminating in a, we had a 1% reduction in the fourth quarter of twenty twenty four, you know, versus let’s say mid single digits gap versus prior year in, in prior quarter. So we’re squeezing it up.

But then what happened was now that didn’t have anything to do with, with abating uncertainty. Uncertainty still stayed constant during that whole 02/2024, but our pivot started to better match the customers. Then what happened was as we came over the year and the administration got into place and you had the rapid fire out of Washington, things like we’re going to put casinos in Gaza and, you know, we’re going to invade Greenland or something and Panama and the and the the blast of tariffs, boy, people started to worry. And these are people, by the way, I might add, that always did and still today are fans of the president. They believe he’s going in the right direction.

I think I’ve said in many in many venues that it’s sort of like Space Mountain. They’re on Space Mountain. They’re in the dark. It’s going left and right, left and right, left and right. They believe where they’re going because they’re going to go a safe place at the end, but they think the thing’s going to go off the rails.

So this is why you saw consumer sentiment going down. Consumer sentiment dropped 30% in three months after December. It dropped to the second lowest time ever. And the first and the the only time worse than that was after the great Shanghai closing in 2022 when the supply chain seemed to be completely disrupted. People, it turns out, worry more about supply than they do about price, actually.

We learned this when they had the gas crisis in the seventies and early eighties. People worried about supply, not so much price. So anyway, that that’s what happened. So you saw it go down. So that outran our pivoting, even though the pivoting was working, we’re still pivoting.

And I, we think as that flattens out, even at the low level, we start to gain on it again. The things we learned a little bit was, you know, I don’t pour water up a rope, but we learned in the past quarters that one of the things you can do is chip away at the bottom end of the bigger, a longer payback items. So we focused not only at the traditional quick payback items like the hand tools and power tools, but we started to say, okay, what about cheaper, lower end diagnostics? What about if we could make some less expensive toolboxes, a version of less expensive toolboxes that would have certain features and we’d sell them to people and that seemed to work in a quarter and we think it’ll work when we go on.

Sherif Elsabahi, Analyst, BofA: And as we think about some of those, those items at the lower end shipping away. Yeah. Is that something that, for example, mechanic might purchase a car that would defer maybe a purchase of a larger box for several years? Or how do you think about the It’s

Nick, Snap-on: like a car. It’s like a car. People buy everybody, every mechanic has a toolbox. You know what I mean? Some of them may have some of the dog food from our competitors.

You know what I mean? But but but in fact, you want to buy a box, it’s like buying a car. And so people move up for for a bunch of reasons. For example, a mechanic may figure I want to buy a toolbox that might seem like to us like a discretionary purchase, but he might say, look, if I can buy this box, this has got this feature where I can charge all my power tools here. I don’t have to walk to any place to charge the power tool.

That saves me time. I can make more money because mechanic is paid not by the hour, but by the job. You know, so that might move him up even if he buys something today. So it’s hard to predict that kind of thing. But of course, some people would say, well, I bought a low end one.

I may delay a little bit. But then he may jump to even higher box than he would have originally. So it’s hard to characterize that situation. I wouldn’t say we don’t look at it like we’re reducing the opportunities in the future by selling the products we’re selling today because we always bring out products. Remember, when we bring out products, we bring it out because we observe the work and figure out how it will make the technician or worker’s job easier and that applies to tool storage boxes.

Sherif Elsabahi, Analyst, BofA: And I want to return for a moment to to C and I. In the last quarter, you know, defense was a bit weaker. Just Weak. Our defense sales had had slowed somewhat due to some of the Right. Administrative changes, which isn’t uncommon.

When we think about that, how often during these periods of change, how long do they last and maybe what do you keep your eyes on for signs that it’s sort of clearing through?

Nick, Snap-on: It’s hard to predict because what happens is, I think you said it correctly. Every time, every time the administration, not every time, but many times when the administration changes, now we have a lot of orders in defense, but every time the administration, many times the administration train and there’s a new sheriff in town and he won’t be pushed around. You know, he goes down there and he says to everybody, okay, we’re going to redo all the purchasing. Well, usually some of that is good and some of it screws everything up and slows everything down and then crush things. And eventually they find, you know, his direction in a more efficient way.

And many times it’s driven by the capitulation to the actual warfighter saying, you know, the 50 caliber bullets are going overhead and I don’t have the tools to repair my, my vehicle. That usually gets people’s attention. And so eventually that wears down the changes. It’s hard to say how that will be, but we don’t expect it to be that long this time because boy, there are two hot wars, you know, and the Houthis are kind of a half war for us, you know, we’re kind of piling stuff on them. And so and then everybody’s worried about China, so you don’t wanna fall behind.

You know, they talk about China building all these ships and stuff. So I wouldn’t expect it to last that long, but it’s hard for me to predict in the in the time constants of the market where everybody’s worried about either they’re me now about the effect of tariffs that were put in place six weeks ago. You know what I mean? It probably doesn’t change that quickly, but we don’t give guidance. So I’m not saying anything about second quarter.

We may be booming, you know, you don’t know. But I think the other critical industries are doing pretty well. In fact, C and I was down what, 2.9% organically, but all of it was explained by the military. It was up in general overall. Profitability was up 15 It was 15.5% up 10 basis points and a gross margins were up a 80 basis points.

So the business was really robust even as the military was down. It was just that we kept spending at lower volumes because we have a lot of faith in the future of the business. That’s in fact, the fact throughout, that’s one of the themes that runs through our quarter. Our OI margin was down some, but gross margin was up, was 50.7%, one of our highest and it was up 20 basis points, but it was the operating expense that was as a percent of sales was higher because we refused to back off spending because we think this is a blip.

Sherif Elsabahi, Analyst, BofA: Understood. And outside of defense, you mentioned that the other end markets were strong across the board. We’ve seen a lot of machinery fleets. Yeah. Replenished the last few years.

Just as we we think about long haul trucking, etcetera, some of these markets that are weakening, does that have any pull through impact to tool or repair demand for C and I?

Nick, Snap-on: For C and I, maybe. I, of course, these markets, all of them, every quarter, there’s some markets that’s weak. C and I has about eight markets or nine markets, you know. I wish they were all strong all the time. We think they should be, but they go up and down.

So heavy duty might go down. I don’t think we see that ourselves, but if you’re telling me long haul trucking is going down, which I’ve heard it is, it might eventually work into our system. But remember that what we sell is usually critical and it makes work easier. So people tend, even during downtime, sometimes people invest in it. This is particularly true in auto repair.

You know, people ask me all the time, wow, if we’re not selling that many new cars, isn’t it gonna kill your business because the dealerships aren’t gonna buy anything? Well, maybe, except dealerships happen to make more money in repair and parts than they do in selling new cars. So many times it ends up more business for us because they get, they’re no longer distracted by that, you know, that weaker margin business of selling new cars. It’s, it’s more or less they want to keep supporting our customers better and making more in terms of service. So they tend to invest in our business.

So our business generally doesn’t follow so clearly new equipment sales almost in any place. It follows the the sort of like repair cycle.

Sherif Elsabahi, Analyst, BofA: And you you mentioned dealerships and

Nick, Snap-on: Yeah.

Sherif Elsabahi, Analyst, BofA: Their equipment. As we look at RSNI, that’s been a a great performer for a long time now. What sort of sentiment among the shops, the dealerships? And in terms of news flow, you know, been hearing about bonus depreciation. Does that drive them investing in CapEx?

Nick, Snap-on: Sure. I think they’re small companies. Mean, I think look. I think I don’t know. Yeah, it will.

I mean, the thing is these are small. I think they’re pretty much pass through businesses, LLCs. And so therefore a lot of the things they’re talking about in the new taxes should encourage them. Now, I don’t know if it makes a boom, you know what I mean? But it’s gotta help their view.

I mean, there are the whole thing about the trifecta about interest and bonus depreciation and all this kind of stuff and expensing. And then there’s also the 199A deduction, which you now get for a small business, a pass through business that you get to deduct from your income depending on how you, how you, how you work. I think it’s 20%. And so that’s, they’re all talking about that being renewed permanently. So if they do that, it’s got to encourage people.

But I think I would say in American terms, those people right now are from Missouri, you know, show me before they get too excited based on somebody saying they’re gonna do this. I think they want to see it. Once they do it, I think it’ll help some. Understood.

Sherif Elsabahi, Analyst, BofA: And, you know, just wanted to turn to the balance sheet for a second. You’ve got a a really strong balance sheet that affords you a lot of flexibility, cash position. You know, just as you look at that sort of net cash position that’s building, does that change your priorities in terms of capital allocation at all?

Nick, Snap-on: No. I look, I think this, I think probably we look at it every quarter. We try to think about what we should do. I think this is a time when there is a lot of uncertainty with our customers or whoever, you know, who knows what that’s going to happen and we feel pretty strong. But on the other hand, don’t mind having a little cash at this point.

Our priorities are like this. We invest first in our business and we are working capital hogs. We use a lot of inventory and a lot of receivables in our business. Now, one of the one of the one of the metrics that we use for all our divisions is return on assets. But it turns out we deploy assets as our sales go up.

I think it’s in the thirties or 35%. Our working capital turns are pretty negligible really, but we like it because we make a lot of money on that on that product and we use it. That’s because we’re so complex. We have some we have 85,000 SKUs. So that’s the first priority.

Second priority is acquisitions because we keep looking at coherent acquisitions. We’re not looking to transform our business. We’re looking to find businesses that do what we do and we know dramatic. We know clearly who we are. We are we are a company who doesn’t make their money by the penny, makes the money in the critical where we can get a premium for solving these problems.

If we see somebody who operates in the critical, we’ll consider acquiring them. But we won’t go into retail. We won’t we won’t venture into things like retail to follow them. Okay. Then we do dividends.

We have paid a dividend every year. We we paid it. We have paid a dividend every year since 1939, and we have never ever reduced it. In fact, we’ve increased our dividend, I think, every year for the last fifteen years. It was up 15.1% in the last year.

So you can probably figure out my my approach to dividends. Who wants to be the first guy to reduce the dividend in a one hundred and five year old company, not me, you know? And so then finally we think about buying back shares. And so we look at those every time. So I can only tell you that we, we look at it, consider the possibilities and go forward.

We haven’t changed our priorities though in that situation.

Sherif Elsabahi, Analyst, BofA: As we think about the longer term, historically, you’ve grown earnings, call it high teens outside the pandemic on mid single digit to high single digit revenue growth. So I’ll grow in your revenue. Just as we look forward, do you see a pathway or any deviation from that? And as we think about growth in the future, what are you most excited about in terms

Nick, Snap-on: of verticals or new products? I’m excited about critical industries. I’m excited about the changes in automotive repair that are happening like electric vehicles, plug in hybrids, the ADS, the advanced driver assist systems, you know, the the autonomous car idea. Because every time a car changes, technicians need new tools and they need help to diagnose the car. For example, you’re trying to diagnose a car, it’s pretty difficult.

There are tens of thousands of trouble codes and it’s very difficult to ferret your way through this in a standard ways to go through a bunch of go through a bunch of decision trees, You got to test this. It’s a physical decision tree. This is what the car is telling me. I’m going through this decision tree.

The OEM tells you to do that. We have a database, 3,000,000,000 records that allows you to shortcut all of that because we’ve seen these cars before. We can tell you when the car says this, this is likely. And so it can shortcut that. And if that isn’t one of them, we give a Pareto diagram.

If one of the three or four things we suggest isn’t one of the problems, we have a 500,000,000,000 record database that will take you through and help you solve the problems that only comes up on alternate Wednesdays on months that have an hour in them. And so the unusual things. And we are the only ones that have this database. The OEMs are blind to it. So as the cars get more complex, people are going to have to turn to this big database and AI in some ways, I hate to say that because it’s too packed now, you know, allows us to manage that database a little bit better and access it better, but it’s getting stronger and stronger for us.

So I like that advantage, the advantage all the way through from scanning, tell them what the car is going to say, because we have the best library, being able to diagnose it, telling people how to actually do the repair. By the way, the average mechanic needs to master the senior mechanic needs to master about 2,000 procedures. How many procedures does a surgeon have to master, by the way? I don’t think that many. And so we can tell them how to do it.

And then with our tools, observing the work and figuring out how to make it easier, we can make it easier for him. So I see that as where we’re I like those areas. I like the diagnose that trend as cars get more complex for both repair shop owners and managers and for tool guys. And I like the idea of getting into more into critical industries because there’s a lot of opportunity there. And then I think we can keep improving because we are heavily vertically integrated.

We’re from, you know, we raw steel comes in the back of a factory. We, we rolled through a bunch of difficult procedures, four or five difficult procedures, some that grind the tool to one thirtieth of a human hair, you know, and we put it in the hands of the actual end user vertically integrated. And we have 85,000 SKUs, which means our, our OI margin last year was 22.7%. And we carried an incredible complexity burden in making that. Some of our competitors have scales that are a hundred times ours and we make more money.

So the idea that we can still ring out improvement is clear based on that. So I have faith that if we never increased another dollar of sales, we would keep our margins going up. Now we have increased sales. So if you look over the last nineteen years in a tool business, right, this is a tool business. We’ve increased sales by 4% a year.

Now that’s not bad, but better, and that’s not great, but it’s better than GDP. And our profitability has improved an average of 85 basis points every year.

Sherif Elsabahi, Analyst, BofA: It seems like complex

Nick, Snap-on: We can keep that going.

Sherif Elsabahi, Analyst, BofA: Well, it seems like complexity is your opportunity. So as we as we think about that, complexity is increasing exponentially. Does that change the way you develop products or your product development cycle at all?

Nick, Snap-on: Actually, no. No. Actually, the complexity is it it again, it’s we keep changing the way we develop. For example, one of the things we’ve been able to change is because when you produce a lot of products, we produce sometimes thousands of products in a year is prototyping becomes a heavy cost. And so the idea of new technologies around three d printing or direct laser metal sintering allow you to shortcut the prototyping process.

We keep working on that. So that’s the kind of things we work on to make our development of tools more effective, but it doesn’t change our idea. The more complex it is, the more opportunity we have. And when we can get a tool that’ll fix something, people will pay us a premium. And then behind that wave, we can keep making it cheaper and cheaper by our rapid continuous improvement structure, which everybody at Snap on gets up every day and says, we’re gonna make things easier.

We’re gonna do our job more productively. That’s our culture.

Sherif Elsabahi, Analyst, BofA: Thank you so much. With that, I think we’re just out of time. Thank you so much for joining us. Sure. Thank you to everyone in the audience.

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